Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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U

565.0000 UNITED STATES CONTRACTORS

Annotation 565.1925

(e) TITLE-PASSAGE CLAUSES

565.1925 Title Passage Prior to Use. A review of Federal Acquisition Regulations (FAR) leads to the following conclusions regulating the passage of title of property to the United States under a contract with U.S. Government contractors:

(A) Government Property in General

For title to overhead materials or direct cost items to pass to the government prior to use by the contractor, the contract must provide for passage of title upon allocation of the property to the contract. This applies regardless of whether the contract is fixed price or cost reimbursable.

(B) Special Tooling and Special Test Equipment

Title to special tooling and special test equipment does not pass immediately to the U.S. The U.S. must take affirmative action in order to obtain title.

(C) Research and Development Contracts with Nonprofit Educational or Research Institution

On fixed price contracts, title to supplies passes to the U.S. upon formal acceptance unless the contract provides for earlier passage of title. On cost reimbursement contracts title to equipment having an acquisition cost of less than $1,000 vests in the contractor. Title to equipment having an acquisition cost of over $1,000 passes as set forth in the contract. Title to direct cost property passes to the U.S. upon allocation to the contract. Title to special test equipment remains with the contractor. Title to special tooling and special test equipment remains with the contractor until the U.S. takes affirmative action to obtain title. 3/13/92.